Insight and Commentary on Business Legal Issues

Discrimination

In a much-awaited decision, the U.S. Supreme Court has thrown out a huge discrimination lawsuit against Wal-Mart that had been filed as a class action by female workers.

The U.S. Supreme Court ruled that a massive lawsuit filed on behalf of 1.5 million female workers against Wal-Mart that alleged the retail giant had systematically discriminated against them in pay and promotions could not go forward as a class-action, and the decision could have far-reaching effects in employment cases.

The Court, in a closely divided 5-4 vote, held that the plaintiffs could not show that Wal-Mart had a common policy of discriminating against women. Instead, because the company allowed individual store managers to decide on pay levels and promotions, the plaintiffs could pursue individual claims if they believed they were discriminated against, but Wal-Mart could not be forced to defend against a class action.

The ruling is a huge victory for Wal-Mart, which spent millions of dollars defending the case, and it may also protect other large employers from similar claims that rely on statistics (rather than hard evidence) that may suggest discrimination based on the race or gender of employees. Had the plaintiffs’ lawyers prevailed against Wal-Mart, other large employers who allegedly relegate women or minorities to lower-paying jobs were seen as likely targets of similar class actions.

While the Court’s majority found it “quite unbelievable” that Wal-Mart managers would exercise their discretion re: pay and promotions in a common way without some common direction, dissenting Justices felt there was enough evidence of systematic sex discrimination by Wal-Mart to allow the suit to go forward. “Women fill 70% of the hourly jobs in the retailer’s stores, but make up only 33% of the management employees,” Justice Ruth Bader Ginsburg wrote. “The higher one looks in the organization, the lower the percentage of women.”

Last week, 3M, known for its Post-It Notes, masking tape, waterproof sandpaper, and Scotch brand tapes settled a claim brought by several hundred former employees who accused the company of age discrimination.

The U.S. Equal Employment Opportunity Commission said its investigation found an e-mail which describes then-CEO Jim McNernery’s “vision for leadership development as “we should be developing 30 year olds with General Manager potential.”

The consent decree, that still requires judicial approval, said 3M will pay $3 million to about 290 former employees and must also provide training on how to prevent age bias and establish a new process for termination decisions.

For employers who make decisions to terminate in a similar situation, they should consider whether there was a legitimate business reason for the decision to terminate, whether they have treated similarly-situated younger employees in the same manner, and if they haven’t, whether there is a good explanation for the difference in treatment.

If an employer can’t affirmatively answer those questions, they may find themselves in a similar situation as 3M.